I was sitting in a doctor’s office yesterday and happened to read a copy of Fortune Small Business from December 2006, which contained an article about a small Connecticut mortgage lender that says a much larger competitor stole its employees and its trade secrets. Even though the story is a few months old, its significance remains current.
Charter Oak Lending Group, LLC of Danbury, Connecticut alleges that CTX Mortgage Company induced several of its employees to leave and to take confidential proprietary information with them. As a result, besides the loss of employees and information, Charter Oak lost about 150 pending loans, which represented $1 million in fees. Charter Oak alleges that its business was decimated in a matter of weeks due to the departures and losses.
In December 2004, Debra Killian, Charter Oak’s president, sued CTX and the employees who left, and alleged causes of action including unfair trade practices, misappropriation of trade secrets, breach of fiduciary duty and computer-related offenses. Last fall, the Connecticut Attorney General sued CTX for corporate raiding and misappropriation of trade secrets.
Ms. Killian was kind enough to talk with me, and said the lawsuit remains scheduled for trial in April 2008. Mandatory mediation must be completed by February 2008. Because the lawsuit has been classified as complex litigation, the parties will have a bench trial. She also told me that CTX has since closed its Danbury office, which it had staffed with the employees raided from Charter Oak. Ms. Killian said her company has never rebounded from the effects of the defections, but remains in business, and she is committed to seeing the lawsuit through to its conclusion. I hope she is successful.